Volkswagen To Shift More Production To China, North America As Russia-Ukraine War Roils Europe Supply Chain

Volkswagen Group VWAGY CEO Herbert Diess said on Tuesday that the German automaker is shifting more production out of Europe to China, North America and Latin America to cope with supply chain issues stemming from Russia’s invasion of Ukraine.

What Happened: Diess said Volkswagen is facing issues related to the supply of parts and raw materials at its plants in Europe and would need to relocate production in three to four weeks, failing which Volkswagen would need to revise its outlook.

“We are building up additional capacities for wiring harnesses for Europe and are shifting car production to regions such as China and the Americas,” Diess said on a call with analysts.

Volkswagen has suspended production in Russia following the country's invasion of Ukraine. The automaker is facing a severe supply crunch for wire harnesses, which it currently sources from Ukraine.

"We have (some) kind of room for maneuvering, but it's not unlimited," Diess said.

See Also: Tesla Hikes Prices In Both US, China For The Second Time Within A Week: All You Need To Know

Diess also warned commodity markets are likely to remain volatile until 2026.

Volkswagen’s global deliveries shrunk by 8.1% to 4,896,900 cars last year. In 2021 China remained its most important market despite a 15% decline in sales. 

In 2022, Volkswagen expects to increase deliveries by 5%-10% boost revenues by 8%-13%.

Why It Matters: Inflationary pressures have further exacerbated the global automotive supply chain that has already been battling semiconductor shortages for nearly two years now. 

Tesla Inc TSLA on Tuesday bumped up the prices of its electric vehicles for the second time in less than a week. The moves followed CEO Elon Musk’s tweet warning the EV maker is facing significant inflationary pressure on raw materials and logistics. 

See Also: Porsche Suspends Electric Taycan Production At German Plant As Supply Chain Problems Bite

Nickel trading is expected to resume in London today after a week-long pause that saw pieces of the key metal used in electric vehicle batteries rocket to new records.

Price Action: Volkswagen stock closed 0.8% higher at $23.1 a share on Tuesday.

Photo courtesy: Volkswagen Group